Question

A landowner has just acquired 370 acres of new land, and is using the Cost-Benefit Principle to decide between three alternative uses for the land: growing corn, growing soybeans, or renting it to a local farmer. If corn is planted, the landowner expects to earn $980 per acre, while soybeans pay only $575 per acre. Renting the land earns the landowner $400 per acre. In addition, the cost of growing and harvesting corn is estimated to be $203,500, while only $88,800 for soybeans. We can assume there are no costs associated with renting the land.

Required:
a. For this landowner, the opportunity, or implicit cost of growing corn is $___________ from____________
b. The opportunity, or implicit cost of growing soybeans is $___________ from ___________
c. The landowner maximizes economic surplus by ____________

Answer 1

See explanation below.

Step-by-step explanation:

a. Opportunity cost is a term in economic, which is used to express cost, in terms of forgone alternatives.

For this landowner , the opportunity , or implicit cost of growing corn is $148,000 [$400 per acre × 370 acres] from renting the land.

b. The opportunity cost or implicit cost of growing soya beans is $148,000 [$400 × 370 acres] from renting the land.

c. The landowner maximizes economic surplus by renting the land.